Should I File for Bankruptcy Over Student Loans?

If you currently are struggling to repay student loan debt, you may know that you are not alone. With student loan debt totaling approximately $1.5 trillion dollars and 45 million borrowers in the U.S., many people who are having difficulty managing student loan debt want to know if they should file for consumer bankruptcy. Indeed, as an article in Forbes underscores, student loan debt currently is “the second highest consumer debt category—behind only mortgage debt—and higher than both credit cards and auto loans.” At the same time, however, many consumers who are grappling with student loan debt have heard that discharging student loans in bankruptcy can be difficult or even impossible.

A recent report from U.S. News & World Report considers student loans and bankruptcy, and discusses situations in which debtors should consider filing for personal bankruptcy in order to discharge student loans.

It is a Myth That Student Loans Cannot be Discharged in Bankruptcy
The recent report highlights how many debtors have heard that student loan debt cannot be discharged when you file for Chapter 7 bankruptcy and underscores that this is a myth. As the article explains, “it can be done,” yet many debtors are not pursuing bankruptcy. More should consider the benefits of bankruptcy when a large portion of their debt is made up of student loans.

The report cites a new study from LendEDU, which indicates that more than 30% of Americans who file for Chapter 7 bankruptcy have student loan debt. Of those debtors, approximately 50% of them were in a situation in which all or nearly all of their total debt came from their student loans. For many of those debtors, their student loans were discharged.

First, Consider Bankruptcy Alternatives if You Primarily Have Student Loan Debt
If you are struggling to repay student loans, there may be options available to you that do not require you to file for bankruptcy. For example, if you apply for an income-driven repayment (IDR) plan, you could be required to pay much less per month for your student loan payments. In addition, if you are unable to make payments at this point, you can request a deferment or a forbearance.

If an IDR plan, deferment, or forbearance are insufficient, then you should begin speaking with a bankruptcy lawyer about your options for discharging student loans in bankruptcy.

You May be Able to Discharge Your Loans Through Chapter 7 Bankruptcy
While courts still require debtors to show an undue hardship in order to have their student loans discharged—and different courts use different specific tests—it is possible for many debtors to prove that they are eligible to have their student loans discharged. For most debtors, you will need to be able to pass the “Brunner test.” To do so, you must be able to prove that your current income and expenses are not feasible for maintaining a minimal standard of living, that you expect that situation to continue, and that you have made a good faith effort to repay your student loans.

Learn More from an Oak Park Bankruptcy Lawyer
Do you have questions about discharging student loan debt in bankruptcy? An Oak Park bankruptcy attorney can help. Contact the Emerson Law Firm to speak with an advocate about your case.


See Related Blog Posts:

Recent Changes to U.S. Bankruptcy Law

Five Things to Know About Chapter 7 Bankruptcy for Consumers

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